John McCain's Senior Policy Adviser Nancy Pfotenhauer is one of the rare campaign staffers who has equal footing in policy creation and communications. "Sometimes I feel like a wishbone, but I love it," she told me. On any given day she's storming the TV news networks to face off against members of Barack Obama's economic team, or former Clintonistas like James Carville, ready to argue McCain's position on issues like taxes and spending. "This is what nerds do when they grow up," she laughed. After the jump, her thoughts on the hurdles ahead, tax cuts, and the difference between Obama and McCain's healthcare plans.

What are the biggest hurdles in the days ahead as you work to close out this campaign? It’s getting people to focus on the different paths that these two men are advocating. Although my field is domestic policy, when you look at foreign policy you could not get two more different paths. Sometimes that gets lost because people use a lot of the same terms when discussing things, everyone talks about the middle class, and they talk about cutting taxes. But the policies they are advocating could not be more different and I think McCain’s path is the one towards prosperity, reform and peace. Senator Obama’s are a disaster from an economic standpoint and I am very concerned about statements he’s made in the foreign policy arena that he’s been roundly criticized for even by his own vice president!

How do you convince voters McCain is more equipped to lead the country out of this financial crisis than Obama? The past is prologue. Senator McCain has throughout his career supported low government spending, low taxes and free trade. Those are the three most important ingredients for economic prosperity whether they are applied in this country or any other country. Senator Obama is high taxes, high spending and protectionist and that would be a recipe for recession in whatever country that is applied. You can point to times where our prescription has been applied at different times in our history in the 80’s in the 90’s or you could point to Ireland or you could point to New Zealand a decade ago. When these approaches are applied it yields economic growth, job creation and prosperity. When Senator Obama’s approach is applied whether it’s here or in countries like Germany and France it yields lower economic growth, higher unemployment and a standard of living that is roughly a third below the U.S. standard of living.

Barack Obama repeatedly promises he is going to give a tax cut to 95 percent of Americans. Why won’t that work? It can’t be done. 30 percent don’t pay taxes to begin with, so what’s he’s really referring to is tax expenditures, so it’s expenditures through the tax code. That’s not a reduction in the taxes someone is currently paying, it’s a decision on his part to use the tax code to provide direct cash to individuals. Their problem is that Senator Obama’s plan raises taxes on capital formation and what we’ve witnessed in this global financial meltdown is that the market for capital is worldwide. It will flow. There are no borders, it will flow to whatever market has the most attractive return and he makes the U.S. a less attractive market. We’re already struggling for things like jobs because we have the second worst business tax rate in the world .Senator Obama raises taxes on capital formation, he doesn’t reduce the burden in the most obvious place that makes job creation anti-competitive and makes our companies shoulder that extra burden. And by the way, reducing business tax rates has been proven over time to lead the higher wages and lower prices for consumers. His tax policy penalizes job creation and while it may provide some relief to some people, it does so at the cost of killing jobs.

Could you do a compare and contrast of John McCain and Barack Obama’s healthcare plan and explain what’s going on with Obama’s claim McCain will make us pay taxes on our health care? This is the one area where I have actually used the “l” word and said Barack Obama’s campaign lies. The betrayal of our health care plan is so blatantly false that they’ve failed every fact checker, including those from mainstream media. What we do is that we say if you currently receive your health insurance from your employer and you like that, that’s fine. You can continue to do so. If you don’t, say you’re self-employed, or unemployed, or part time and you don’t get health insurance we are going to provide everybody with a $5,000 per family, $2,500 per individual refundable tax credit. You can use that to purchase health insurance if you don’t have the opportunity to get it from you employer or you can use it to offset any cost that you incur because of unfavorable tax treatment. Right now the tax code discriminates between how you get your health insurance. If you get it through your employer, it is not taxed as income whereas the rest of individuals have to buy their health insurance with after tax dollars. We remove that bias and then make a generous refundable tax credit...Let me walk through an example. So, if you’re making $40,000 a year that would put you in the 15 percent tax bracket. You’re [employer-provided] health insurance policy is worth $12,000 and the way you figure out you tax consequence is you multiply 15 percent times $12,000 and that turns out to be $1,800. So currently under the current system with no change, you are basically allowed to write-off that $1,800. Under our system we are giving you $5,000 [or $2,500 as an individual]. You are $3,200 better off from a tax consequence standpoint than you are under the current system! he delta for how much better off you are is much bigger at the lower end, so it’s extraordinarily progressive. I understand that it’s more complicated than the typical policy, but there are people at the Obama camp who understand how this works and that’s why Jason Furman [Obama’s economic advisor] has even advocated a tax credit approach before.